Apple Turns Tables Seeking U.S. Samsung Phone Sales Ban

Apple Inc. (AAPL) is trying to force Samsung Electronics Co.’s mobile devices off U.S. store shelves a week after dodging an iPhone 4 ban by a rare White House veto.

The company will ask a U.S. appeals court tomorrow to block sales of Samsung models a California jury found violated patents for the iPhone’s look and features. Later, a U.S. trade agency is expected to say if it will halt some Samsung imports based on other Apple patent-infringement claims.

For Cupertino, California-based Apple, making Samsung change or stop selling some smartphones and tablet computers is more important than money. The $1 billion verdict it won at trial last year equals less than two weeks’ worth of iPhone sales and one-seventh of Samsung’s second-quarter profit.

“Sometimes, the money’s not enough,” said Ray Van Dyke, a technology-patent lawyer with the Van Dyke Firm in Washington. “Between Apple and Samsung, it’s about who’s going to be the top dog. You want to shut them down. This is the club. You can beat them into submission with a club and maintain your top dog status.”

Apple and Samsung together make almost half of all smartphones sold, with Samsung holding the title of world’s biggest and the two companies vying to be No. 1 in the U.S.

Photographer: SeongJoon Cho/Bloomberg

Apple Inc. and Samsung Electronics Co. together make almost half of all smartphones sold, with Samsung holding the title of world’s biggest and the two companies vying to be No. 1 in the U.S. Close

Apple Inc. and Samsung Electronics Co. together make almost half of all smartphones... Read More

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Photographer: SeongJoon Cho/Bloomberg

Apple Inc. and Samsung Electronics Co. together make almost half of all smartphones sold, with Samsung holding the title of world’s biggest and the two companies vying to be No. 1 in the U.S.

The two companies are spending millions of dollars in legal fees battling across four continents. Neither has been able to strike a crippling blow. An import ban that could have halted some of Apple’s older iPhone 4 and iPad 2 3G models at the U.S. border was vetoed by President Barack Obama’s administration last week.

1 Percent

Slowing Samsung’s momentum will be hard -- most of the models named in Apple’s patent cases are no longer sold as Samsung regularly introduces new devices in different price ranges. The company said it has designed around the Apple patents in newer products.

“Samsung’s U.S. sales of the older products in question are very small, which accounts for even less than 1 percent of the company’s total handset sales there,” said Kim Young Chan, a Seoul-based analyst at Shinhan Investment Corp.

Based on Samsung’s filings with the U.S. International Trade Commission in Washington, the impact will depend on the wording of any import ban imposed by the agency. A broadly worded order finding infringement of Apple’s patent for the phone’s front design “could create an immediate shortage of millions of mobile devices,” the filing said.

Koreans Watching

The trade commission, which investigates unfair trade practices, is scheduled tomorrow to announce results of its review of a judge’s findings that some Samsung models infringed four Apple patents.

If there is a violation, the commission could order a ban on imports. That too would be subject to review by the Obama administration, and the Korean Ministry of Trade said Aug. 5 it would be watching the case.

“Obama may issue the reprieve again for Samsung, and if not, it will only bring up even bigger international conflict,” said Lee Sun Tae, an analyst at Seoul-based NH Investment & Securities said by phone. “Consumers no longer care about Samsung’s ‘copycat’ image any more as it has somewhat vanished, because even with the ongoing litigation, the Galaxy S sales have continued to rise.”

While the patents in the two cases aren’t the same, some of the products overlap, including the Epic 4G and the Indulge that are now available only in pre-owned models. The Galaxy S II, the precursor to the company’s top-selling Galaxy S4, was cleared by the ITC judge of infringing Apple’s design patent.

‘Meticulous Copying’

The cases tomorrow involve different legal standards over the same basic issue -- Apple’s ability to halt Samsung’s sales.

Apple will ask the U.S. Court of Appeals for the Federal Circuit in Washington, which specializes in patent law, to overturn District Judge Lucy Koh’s 2012 order that lets Samsung continue selling devices found to infringe Apple patents. Koh said Apple didn’t prove patented features and designs drove consumer sales, so Apple could be made whole with money.

“Samsung has chosen to compete not through innovation, but through calculated and meticulous copying of Apple’s popular iPhone and iPad,” Apple said in a filing with the appeals court. “After the iPhone’s success, Samsung’s phones became iPhone clones.”

‘Limited Features’

Samsung, which denies infringing the patents, will urge the appeals court to uphold the ruling as it hasn’t even yet determined whether the jury was right in finding infringement.

“The most Apple did was to introduce evidence that some consumers value ‘design’ and ‘ease of use’ in general, a far cry from a showing that the limited features covered by Apple’s design and utility patents drive consumer demand for Samsung products,” Samsung said in its own filing with the court.

The ruling could have broad implications for any company that owns patents for features or components of complex products, like a smartphone or computer.

Google Inc. (GOOG), which owns the Android operating system that Samsung phones use, urged the appeals court to uphold Koh’s ruling. “The owner of a trivial patent has no reasonable expectation of more than trivial compensation,” Google said in a filing that was joined by Rackspace Hosting Inc. (RAX), HTC Corp. (2498) Red Hat Inc. (RHT) and SAP Inc.

Nokia Oyj (NOK1V), which was supplanted as the world’s biggest maker of mobile phones by Samsung, said Koh’s ruling “threatens to turn the traditional purpose of patent law on its head” and force patent owners to accept compulsory licenses for differentiating features.

The Apple ITC case against Samsung is In the Matter of Electronic Digital Media Devices, 337-796, and Samsung’s case is In the Matter of Electronic Devices, Including Wireless Communication Devices, Portable Music and Data Processing Devices, and Tablet Computers, 337-794, both U.S. International Trade Commission (Washington).

The Apple appeal is Apple Inc. v. Samsung Electronics Co. (005930), 13-1129, U.S. Court of Appeals for the Federal Circuit (Washington). The lower court case is Apple Inc. v. Samsung Electronics Co. Ltd., 11-cv-01846, U.S. District Court, Northern District of California (San Jose).

To contact the reporters on this story: Susan Decker in Washington at sdecker1@bloomberg.net; Jungah Lee in Seoul at jlee1361@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net; Michael Tighe at mtighe4@bloomberg.net

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